EUR/JPY moves sideways around 174.50 following disappointing German IFO data

EUR/JPY remains stronger despite the weaker-than-expected German IFO figures.
The headline German IFO Business Climate Index unexpectedly declined to 87.7 in September, against the expected 89.3.
The preliminary Jibun Bank Manufacturing PMI fell to 48.4, while Services PMI eased to 53.0 in September.

Akhtar Faruqui FXStreet

EUR/JPY maintains its position near the 14-month high of 174.65 during the European hours on Wednesday. The currency cross moves sideways after the release of the disappointing headline German IFO Business Climate Index, which unexpectedly fell to 87.7 in September from 89.0 in August. The data undermined the market expectations of 89.3.

Meanwhile, the Current Economic Assessment Index declined to 85.7 during the same period from 86.4 previously, missing the estimated 86.5 reading. The IFO Expectations Index, which indicates firms’ projections for the next six months, declined to 89.7 in September, against the previous 91.6 and expected 92.0 readings.

The Euro faces challenges against its peers amid rising concerns over the economic downturn in France, the second-largest economy within the Eurozone. Tuesday’s docket showed that the HCOB Flash France Composite Purchasing Managers' Index (PMI) declined to 48.4 in September from 49.8 in August, marking its most severe contraction in five months. This figure came in weaker than the expectation of 49.9. Meanwhile, both the manufacturing and services sectors declined sharply in September.

However, the downside of the EUR/JPY cross could be restrained as the Japanese Yen (JPY) loses ground following Japan’s PMI data released on Wednesday. Companies continued to express caution over the outlook amid domestic uncertainty and shifting global trade policies.

The preliminary Jibun Bank Manufacturing PMI fell to 48.4 in September from a final reading of 49.7 in August. The reading came short of market expectations of 50.2, marking the 14th contraction in factory activity over the past 15 months. Meanwhile, Services PMI eased to 53.0 from a 53.1 prior. The latest reading marked the lowest figure since June.

Traders will likely observe Bank of Japan (BoJ) Monetary Policy Meeting Minutes due on Thursday, along with Friday’s Tokyo Consumer Price Index (CPI) data, to gain fresh impetus on the policy path.

Economic Indicator

IFO – Business Climate

This German business sentiment index released by the CESifo Group is closely watched as an early indicator of current conditions and business expectations in Germany. The Institute surveys more than 7,000 enterprises on their assessment of the business situation and their short-term planning. The positive economic growth anticipates bullish movements for the EUR, while a low reading is seen as negative (or bearish).

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